Sathyam Service Trust, Thiruvalla V. CIT, Kottayam

ITA 807/COCH/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7273 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-09-2014
• Assessment Year: misc
• Appeal Filed On: 26-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: SHANMUGHAN D JAYAN
• Keywords: Gift
• Section: 12AA

Judgement Text

1 ITA NO. 807/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 807/COCH/2013 SATHYAM SERVICE TRUST V S CIT, KOTTAYAM MANACKACHIRA, THIRUVALLA PAN : AAGTS0562H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHANMUGHAN D JAYAN RESPONDENT BY : SHRI M ANIL KUMAR, CIT DATE OF HEARING : 24-09-2014 DATE OF PRONOUNCEMENT : 30-10-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER REJECTING THE APPLICATI ON OF THE ASSESSEE FOR REGISTRATION U/S 12AA OF THE ACT. 2. SHRI SHANMUGHAM D JAYAN, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE TRUST WAS ESTABLISHED F OR THE PURPOSE OF RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND OTHER PH ILANTHROPIC ACTIVITIES. THE ASSESSEE HAS ALSO INTENDED TO PROMOTE AND SPREA D CHRISTIAN AND OTHER LITERARY AND CULTURAL ACTIVITIES. THE APPLIC ATION OF THE ASSESSEE FOR 2 ITA NO. 807/COCH/2013 REGISTRATION WAS EARLIER REJECTED BY THE COMMISSION ER OF INCOME-TAX. HOWEVER, ON APPEAL BY THE ASSESSEE BEFORE THIS TRIB UNAL, THE MATTER WAS REMITTED BACK TO THE FILE OF THE COMMISSIONER OF IN COME-TAX WITH A DIRECTION TO PROCESS THE APPLICATION IN TERMS OF SECTION 12AA OF THE ACT. CONSEQUENT TO THE ORDER PASSED BY THIS TRIBUNAL, THE COMMISSIO NER OF INCOME-TAX EXAMINED THE MATTER AND FOUND THAT THE GENUINENESS OF THE ACTIVITY OF THE TRUST WAS NOT SATISFIED. ACCORDING TO THE LD.COUNS EL, THE ASSESSEE HAS ESTABLISHED A SCHOOL FOR MENTALLY CHALLENGED STUDEN TS. THE GOVERNMENT OF KERALA SANCTIONED FUNDS TO THE ASSESSEE SOCIETY FOR PROVIDING VOCATIONAL TRAINING TO THE MENTALLY CHALLENGED STUDENTS. ACCO RDING TO THE LD.COUNSEL, THE COPY OF THE ORDER IS AVAILABLE AT PAGE 50 OF TH E PAPER BOOK. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE IS M AINTAINING 38 MENTALLY AND PHYSICALLY RETARDED STUDENTS. APART FROM THAT 14 HANDICAPPED STUDENTS ARE TRAINED FOR UMBRELLA MAKING AND COMPUT ER OPERATION. THE ASSESSEE TRUST IS RUNNING SATHYAM VOCATIONAL TRAINI NG CENTRE FOR TRAINING THE WOMEN IN TAILORING. THE ASSESSEE HAS ALSO PROV IDED WHEEL CHAIRS, LOVE BUCKETS (KITS CONTAINING ESSENTIAL COMMODITIES) TO SEVERAL THOUSANDS PEOPLE. THE ASSESSEE IS ALSO HELPING 50 ORPHAN STU DENTS. THE ASSESSEE IS PROVIDING FREE EDUCATION TO 100 STUDENTS IN GAND HISM. THE ASSESSEE HAS ESTABLISHED A SCHOOL AT VIJAYANAGARAM AND PROVI DING EDUCATION TO 250 STUDENTS. THE ASSESSEE DONATED RS.4 LAKHS FOR THE PEOPLE, WHO WERE AFFECTED BY TSUNAMI. WHEN AMALA WIND DESTROYED THE INFRASTRUCTURE OF THE 3 ITA NO. 807/COCH/2013 STATE, THE ASSESSEE HAS DONATED RS.2,50,000. SIMIL ARLY WHEN THE GUJARATI PEOPLE SUFFERED DUE TO EARTHQUAKE, THE ASSESSEE HAS DONATED RS.4 LAKHS. REFERRING TO THE PAPER BOOK, THE LD.COUNSEL SUBMITT ED THAT THE ASSESSEE HAS RECEIVED SEVERAL CONTRIBUTIONS FROM FOREIGN COU NTRIES. THE ASSESSEE HAS INFORMED ABOUT THE RECEIPT OF GIFT TO THE RESPE CTIVE AUTHORITIES UNDER THE FOREIGN EXCHANGE MANAGEMENT ACT (FEMA). THE SO URCE OF RECEIPT OF THE MONEY FROM FOREIGN COUNTRIES AND PURPOSE OF THE RECEIPT OF MONEY AND THE UTILIZATION THEREOF WAS INTIMATED TO THE RESPEC TIVE AUTHORITIES. THE COPIES OF THE SAME ARE AVAILABLE AT PAGES 51 TO 84 OF THE PAPER BOOK. ACCORDING TO THE LD.COUNSEL, SEVERAL CONTRIBUTIONS WERE MADE FOR A SPECIFIC PURPOSE. THEREFORE, THE SAME CANNOT BE DIVERTED BY THE ASSESSEE. WHEN THE DONATION WAS RECEIVED FOR A SPECIFIC PURPOSE FR OM FOREIGNERS THE SAME HAS TO BE USED ONLY FOR THE PURPOSE FOR WHICH IT WA S DONATED. THE ASSESSEE HAS ALSO RECEIVED WHEEL CHAIR FROM FOREIGN COUNTRIES AND THE SAME WAS DISTRIBUTED TO THE INTENDED PEOPLE. THESE ASPECTS EVEN THOUGH AVAILABLE BEFORE THE COMMISSIONER OF INCOME-TAX WAS NOT CONSIDERED. THE COMMISSIONER OF INCOME-TAX SIMPLY SAYS THAT FOR THE FINANCIAL YEAR 2008- 09 THE ASSESSEE HAS RECEIVED RS.1,23,00,775. SIMIL ARLY FOR THE FINANCIAL YEAR 2009-10 THE COMMISSIONER OF INCOME-TAX SAYS TH AT THE TRUST RS.64,46,607. DURING THE FINANCIAL YEAR 2010-11, A CCORDING TO THE COMMISSIONER OF INCOME-TAX, THE ASSESSEE RECEIVED D ONATION OF RS. 1,15,55,748. THE ASSESSEE HAS FILED ALL THE DETAIL S WITH REGARD TO 4 ITA NO. 807/COCH/2013 UTILIZATION OF THE FUNDS RECEIVED BY THE ASSESSEE B EFORE THE COMMISSIONER OF INCOME-TAX. HOWEVER, THE COMMISSIONER OF INCOME -TAX, WITHOUT CONSIDERING THE MATERIAL FILED BY THE ASSESSEE SIMP LY SAYS THAT THE ASSESSEE COULD NOT EXPLAIN HOW FUNDS WERE UTILIZED. ACCORDING TO THE LD.COUNSEL, THE COMMISSIONER HAS TO EXAMINE THE MAT ERIALS AVAILABLE ON RECORD INCLUDING THE ACTIVITIES CARRIED ON BY THE A SSESSEE AND THEREAFTER HE HAS TO RECORD HIS SATISFACTION WHETHER THE ACTIVITY OF THE TRUST IS GENUINE OR NOT? WITHOUT EXAMINING THE ACTIVITIES OF THE ASSES SEE, ACCORDING TO THE LD.COUNSEL, THE COMMISSIONER OF INCOME-TAX CANNOT S AY THAT THE OBJECT OF THE TRUST IS NOT GENUINE. 3. ON THE CONTRARY, SHRI M ANIL KUMAR, THE LD.DR SU BMITTED THAT THE ASSESSEE HAS RECEIVED HUGE DONATION FROM FOREIGN CO UNTRIES YEAR AFTER YEAR. THIS WAS UNEARTHED DURING THE COURSE OF SURV EY OPERATION. IN SPITE OF SPECIFIC QUERY, THE ASSESSEE COULD NOT EXPLAIN T HE SOURCE OF RECEIPT OF THE FUNDS AND THE UTILIZATION OF THE AMOUNT TO THE SATISFACTION OF THE COMMISSIONER OF INCOME-TAX. THE ASSESSEE TRUST SIMP LY SHOWN IN THE BALANCE-SHEET THAT THE MONEY WAS SPENT AS PER THE D IRECTION OF THE CONTRIBUTOR. HOWEVER, IT IS FOR THE ASSESSEE TO EX PLAIN HOW THE CONTRIBUTION RECEIVED FROM FOREIGN COUNTRY WAS UTILIZED IN INDIA . IN THE ABSENCE OF ANY MATERIAL WITH REGARD TO UTILIZATION OF FUNDS FOR CH ARITABLE ACTIVITY, COMMISSIONER OF INCOME-TAX FOUND THAT THE ASSESSEE HAS NOT USED THE 5 ITA NO. 807/COCH/2013 FUNDS FOR CHARITABLE ACTIVITY AND THE GENUINENESS O F THE ACTIVITY IS NOT ESTABLISHED. THEREFORE, THE COMMISSIONER OF INCOME -TAX HAS RIGHTLY REJECTED THE APPLICATION OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AT PAGE 50 OF THE PAPER BOOK THE ASSESSEE FILED A COPY OF THE ORDER PASSED BY TH E EDUCATIONAL DIRECTOR, GOVERNMENT OF KERALA. FROM THIS YEAR IT APPEARS TH AT THE ASSESSEE HAS APPLIED FOR FINANCIAL ASSISTANCE TO START VOCATIONA L TRAINING CENTRE IN THE SCHOOL RUN BY THE ASSESSEE FOR MENTALLY CHALLENGED STUDENTS. THE GOVERNMENT OF KERALA ALLOTTED A SUM OF RS.1 LAKHS F OR FOUR DIFFERENT UNITS WITH A CONDITION THAT THE AMOUNT SHOULD BE USED TO START THE UNIT AS PER THE ORDER OF SANCTION. FROM THIS LETTER OF THE STATE G OVERNMENT IT IS OBVIOUS THAT THE ASSESSEE IS CONDUCTING VOCATIONAL COURSES FOR M ENTALLY CHALLENGED CHILDREN. THE GOVERNMENT OF KERALA HAS ALSO EXTENDE D ITS ASSISTANCE BY SANCTIONING RS.1 LAKH. 5. THE MATERIAL AVAILABLE ON RECORD SHOWS THAT THE ASSESSEE HAS RECEIVED OTHER CONTRIBUTION FROM FOREIGN COUNTRIES. THE ASSESSEE APPEARS TO HAVE INFORMED THE CONCERNED AUTHORITY UNDER THE FEMA WITH REGARD TO RECEIPT OF THE CONTRIBUTION. FOR THE YEAR ENDED 31 -03-2007 THE ASSESSEE HAS DISCLOSED THE RECEIPT OF RS.1,10,95,951. FOR T HE YEAR ENDED 31-03- 6 ITA NO. 807/COCH/2013 2008 THE ASSESSEE HAS DISCLOSED FOREIGN CONTRIBUTIO N OF RS.1,91,01,741.28. THE ASSESSEE HAS ALSO MENTIONED THE PURPOSE FOR WHICH THE MONEY WAS RECEIVED AND THE AMOUNT UTILISE D AS ALSO THE BALANCE AVAILABLE FOR UTILIZATION. THE ASSESSEE HAS ALSO D ISCLOSED THE BANK ACCOUNT NUMBER TO WHICH THE MONEY WAS DEPOSITED OR CREDITED. THE CONTENTION OF THE ASSESSEE BEFORE THIS TRIBUNAL IS THAT EVEN THOUGH THE FOREIGN CONTRIBUTION WAS DISCLOSED TO THE DEPARTMEN T, MANY CONTRIBUTIONS WERE RECEIVED IN KIND BY WAY OF WHEEL CHAIR, ETC. ACCORDING TO THE LD.COUNSEL, THE WHEEL CHAIRS RECEIVED WERE SIMPLY D ISTRIBUTED TO THE BENEFICIARIES. THE ASSESSEE HAS PRODUCED THE ENTIR E DETAILS OF THE FOREIGN CONTRIBUTION RECEIVED, THE PURPOSE FOR WHICH IT IS RECEIVED AND ITS UTILIZATION. THE COMMISSIONER OF INCOME-TAX APPARENTLY HAS NOT E XAMINED THE DETAILS FURNISHED BY THE ASSESSEE INCLUDING THE INFORMATION FURNISHED BY THE ASSESSEE TO THE CONCERNED AUTHORITY UNDER FEMA. WE ARE CONSCIOUS THAT THIS IS THE SECOND ROUND OF LITIGATION. UNDER NORM AL CIRCUMSTANCES WE WOULD HAVE DECIDED THE MATTER ON MERIT BY EXAMINING THE MATERIAL AVAILABLE ON RECORD. HOWEVER, IN THIS CASE, THE CO MMISSIONER OF INCOME- TAX HAS NOT EXAMINED THE DETAILS OF INFORMATION FUR NISHED BY THE ASSESSEE TO THE CONCERNED AUTHORITY UNDER FEMA AND THE SANCT ION OF GOVERNMENT OF KERALA PROVIDING FINANCIAL ASSISTANCE TO THE SCHOOL RUN BY THE ASSESSEE FOR MENTALLY CHALLENGED STUDENTS AND OTHER ACTIVITIES W ITH REGARD TO FREE EDUCATION HELPING THE ORPHANS, DONATION MADE BY THE ASSESSEE DURING 7 ITA NO. 807/COCH/2013 TSUNAMI, AMALA WIND AND GUJARAT EARTHQUAKE. THESE ARE ALL MATERIAL WHICH ARE TO BE CONSIDERED BY THE COMMISSIONER OF I NCOME-TAX AT THE TIME OF REGISTRATION. THESE FACTORS HAVE TO BE TAKEN IN TO CONSIDERATION TO FIND OUT THE GENUINENESS OF THE ACTIVITY OF THE ASSESSEE . THE COMMISSIONER OF INCOME-TAXS ORDER IS SILENT ABOUT THESE ACTIVITIES WHICH ARE SAID TO BE CARRIED OUT BY THE ASSESSEE. THEREFORE, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE COMMISSIONER OF INCOME-TAX SHALL R E-EXAMINE THE MATTER AFRESH AFTER CONSIDERING ALL THE ACTIVITIES SAID TO BE CARRIED OUT BY THE ASSESSEE, THE SOURCE OF FOREIGN CONTRIBUTION, THE P URPOSE OF CONTRIBUTION AND THE UTILIZATION OF FUNDS BY THE ASSESSEE AND TH EREAFTER DECIDE WHETHER THE OBJECT AND THE ACTIVITY OF THE ASSESSEE TRUST I S GENUINE OR NOT? ACCORDINGLY, THE ORDER OF THE COMMISSIONER OF INCOM E-TAX IS SET ASIDE AND THE ISSUE OF REGISTRATION IS REMITTED BACK TO THE F ILE OF COMMISSIONER OF INCOME-TAX. THE COMMISSIONER OF INCOME-TAX SHALL RE -EXAMINE THE MATTER AFRESH IN THE LIGHT OF THE MATERIAL AVAILABLE ON RE CORD. THE COMMISSIONER OF INCOME-TAX SHALL BRING ON RECORD WHETHER THE ASS ESSEE HAS ACTUALLY CARRIED ON THE ACTIVITIES AS CLAIMED AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY TO THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 8 ITA NO. 807/COCH/2013 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH OCTOBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 30 TH OCTOBER, 2014 PK/- COPY TO: 1. SATYAM SERVICE TRUSTY, MANACKCHIRA, THOTTABHAGAM PO, THIRUVALLA 689 541 2. THE CIT, PUBLIC LIBRARY BUILDING, SASTRI ROAD, K OTTAYAM 3. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH